Morning Musings From Art Cashin - Thoughts On Iran Shipment

Stop Stalling! It’s Time To Get Going – The bulls remained stuck on the bear’s goal line for the second straight day. In fact, early in the session, the bulls lost some yardage. Then, in the final 90 minutes, stocks moved sharply upward, albeit in light volume.

Some of the conspiracy theorists assumed it was a “manufactured rally”, caused by something like the fantasy “plunge protection team”.

I have written over the years that people need structure and reason to explain events, especially unexpected events. Human nature abhors randomness. As Voltaire said, “If God did not exist, man would have to invent him.”

Conspiracy theorists tend to go the other way. Instead of chalking random or surprise events to “Gods will”, they see it as the result of some secret government cabal. It is no different than the bettor whose horse did not win claiming the race must have been “fixed”.

We tend to think we err, not because we were wrong, but because others played unfairly. It’s very convenient but incorrect. There is no plunge protection team. Being an amalgam of many humans, the markets can morph from behaving like a crowd and start behaving like a mob - sudden irrational mood shifts. The fault, dear Brutus……

Anyway, back to Monday’s action – or maybe inaction, since the volume decreased and the trading was dull.

The late levitation returned the S&P to the level of its Friday close. As we used to say, it was the waste of carfare and a clean shirt. We’ll see if they can move the ball today.

What’s That Noise In The Basement – The markets and Wall Street analysts seem to have adopted a distinct posture on incoming economic data.

If the news is bad, it is probably the result of the snowstorms. If the news is good, it’s just good news.

We are tempted, however, by some non-weather related data.

The ECRI, a noted leading indicator, has turned down markedly. It has a good record so the seeming rollover puts me on alert.

In addition, another newer indicator is also flashing warning signals. Several financial blogs have picked it up. Here’s how the savvy Barry Ritholtz began a discussion of the indicator in his Big Picture blog:

What makes them so interesting to me is that they are not economists — they are simply number geeks trying to analyze U.S. consumer data in real-time. The goal is to uncover macro-economic trends by using different data then everyone else.

Rick Davis runs the place. He is a physicist enamored with what numbers say — and he is less than impressed with what the economics profession does:

My real gripes with the established economists are their lack of innovation. The lags and revisions in their data drive me crazy. There are enormous amounts of real-time data available that hardly anyone knows how to analyze. Our current problem is that we are so far ahead of the traditional data sources that hardly anyone takes us seriously.

The thing that caught the attention of Ritholtz and several other bloggers was a chart of the Consumer Metric Institutes “Daily Growth Index” (DGI) against the quarterly GDP. The chart only goes back four years but appears to show the DGI correctly leading the GDP by several months. The chart shows the DGI has turned down sharply which may bode ill for the GDP and the economy in the coming quarters.

Is It A Bluff Or Is It Battle Preparation? – Several blogs have picked up on reports that the U.S. may be transferring “bunker-buster bombs” to a base in the Indian Ocean. Here’s a part of a story in the Sunday Herald of Scotland:Hundreds of powerful US “bunker-buster” bombs are being shipped from California to the British island of Diego Garcia in the Indian Ocean in preparation for a possible attack on Iran.

The Sunday Herald can reveal that the US government signed a contract in January to transport 10 ammunition containers to the island. According to a cargo manifest from the US navy, this included 387 “Blu” bombs used for blasting hardened or underground structures.

Experts say that they are being put in place for an assault on Iran’s controversial nuclear facilities. There has long been speculation that the US military is preparing for such an attack, should diplomacy fail to persuade Iran not to make nuclear weapons.

Although Diego Garcia is part of the British Indian Ocean Territory, it is used by the US as a military base under an agreement made in 1971. The agreement led to 2,000 native islanders being forcibly evicted to the Seychelles and Mauritius.

We still think the U.S. would have a tough time “going it alone”. Forces in nearby Iraq and Afghanistan would be suddenly vulnerable. The U.S. could not prevent a blockage of the Straits of Hormuz, cutting off huge supplies of oil. Nevertheless, we’ll try to vet this story further.

Answer - The average bus speed would be 18 mph. If you assume the busses ran at regular intervals, the deciding factor is the speed of the walker (2 mph), which allows him to meet 10 more busses than pass him. The solution can be found by algebra or common sense. The common sense might take up 12 pages, so here is the algebra: 50 (X-2) = 40 (X+2) which results in 18 as the value of "x" and thus the average speed of the bus.

Today’s Question - What did you say? - Fill in the blanks with one word to make the sentence make sense in plain English - "Esrever is _____________ in _____________."

History Trivia

On this day (-2) in 1794, a patent was awarded to a resident of Mulberry Grove, Georgia. It was for a device that would revolutionize post-revolutionary America and start it on its way to world power.

The principle of the device was simple. It was a rotating drum with spikes on it. The spikes grabbed the valuable part of a plant, pulled it away from the stem and, as the wheel turned, further cleared the valuable part from the seed. The inventor's name was of course Eli Whitney and the invention was the cotton gin (some think gin is short for engine but a good bet is from the old English word for snare or trap...gin...since it trapped the seeds).

Anyway, the gin immediately turned cotton into a key crop and within a decade many millions of dollars were flowing into the cotton industry. So you would think Whitney got rich. Well you would be wrong. The device was so simple that within days of getting the patent, Whitney found himself surrounded by cheap knockoffs or clones. And, when he asked the Washington crowd to enforce his patent, they acted like they had cotton in their ears. (Cynics think money played a part in the government ignoring Whitney. How silly can they be....money influencing some folks in Washington? Come on now!)

Having failed to make money with his Cotton Gin he toyed with the idea of a cotton vodka but instead invented the concept of interchangeable parts - leading eventually to mass production, the assembly line and later Japan and ultimately China.

The market could have used a little mass production Monday. In fact, it could have used any kind of production at all.

he 'knows' "they" exist but he also knows better than to publicly proclaim so.

as for whether the PPT is an active mkt participant ? puhlease. did the sun rise today ?

art's larger point still rings loudly: financial markets are not random and are not (overtly) manipulated by a backroom broker/dealer cabal, 'they' are the product of our collective emotions / opinions at any given moment in 'time'.

Diego Garcia is really really really fucking small to be anything else than possibly a training and storage base. If you look up the satellite images on GOOG-maps it is clearly visible that the base has enough space to accommodate only 6 cargo planes. I think this has been blown out of proportion, and that nothing will happen from the US side of the aisle. If anything, it is a far greater possibility that the US will attack Israel, especially after a recent comment made by Israeli military historian Martin Levi van Craveld in which he states that Israel has nuclear weapons strategically aimed at major European cities in case if anything unpredictable happens and Israel needs to engage the so called "Samson Option".

B-1s and I possibly B-52s were flying missions out of Diago (and may still be) during IraqII and Afghanistan so moving bombs there is not a surprise. A possible scenario is B-1s and B-52s fly from US fully loaded, drop their loads on Iran and then some or all fly on to Diago to re-arm/re-fuel/change crews and then fly back to Iran drop some more and then on to the US. B-2s only fly out of the US and return, as there is no support for them anywhere else.

I don't think it was the PPT, I think that Goldman plants stories in the press like these right before option expiry each month.

And the whole idea of invading Iran has to be based around destroying the navy and airforce very quickly, and hitting as few oilfields and civililian targets as possible. No ground invasion, just a 4-hour war where we (1) destroy nuclear capibility (2) destroy the airforce and navy (3) destroy as many Revolutionary Guards barraks as possible and (4) tip the balance of power towards the voters in Iran.

"I have written over the years that people need structure and reason to explain events, especially unexpected events. Human nature abhors randomness. As Voltaire said, “If God did not exist, man would have to invent him.”

And many humans would rather see random events and chance as the cause of the observed events rather than to come face to face with the pain of cognitive dissonance and actually see what they don't wish to see. It works both ways Art. You claim people see what they wish to see. I agree. You are just as guilty as anyone else. In fact, if you pull out the playbook for psychological warfare, this is the very premise that makes psyops work, that you can hide within someone's blind spot to influence seemingly random events and never be discovered.

For Art to not only see manipulation but then admit to the manipulation require he change his entire worldview and belief system. Since the worldview he currently employs not only has served him very well for 60 plus years but he must maintain that worldview in order to conduct his living and pay his bills, it doesn't take a stretch of the imagination to understand he sees exactly what he wants to see, including everyone else's blindness and his perfect 20/20 vision. Art's hubris of certainty is his blind spot. He can't see what he can't imagine seeing.

For Art to not only see manipulation but then admit to the manipulation require he change his entire worldview and belief system. Since the worldview he currently employs not only has served him very well for 60 plus years but he must maintain that worldview in order to conduct his living and pay his bills, it doesn't take a stretch of the imagination to understand he sees exactly what he wants to see, including everyone else's blindness and his perfect 20/20 vision

Salesmen... catering to the Evangelical Crowd... Spread the Word, Pray for the "End" and Buy Gold... bunch of idiots! Buy Gold @ $10k an ounce when the middle market comes back you can dump it for twice that... the middle Loves to Hedge... I was rolling laughing when I typed this to be clear!

When futures spike ahead of stocks, what could that mean, Art? Especially in the context of no news. Reactions to news events are generally synchronous between futures and stocks. So when futures move ahead of stocks, what does the futures market "know" that the rest of us don't???

I don't think that he's saying that they don't exist, I think that he's saying that their impact really isn't a day to day role like others might believe.

There isn't a boogeyman in every closet. Sometimes the markets are working for themselves.

It might be that the PPT is actually only stepping in on absolutely horrid days like the 666 low, for example, to prevent further damage. Nobody knows the extent of their work, and it could be a lot less than others might believe. Just because they exist doesn't mean that they're behind every pump and stopping every dump.

"This is starting to get dangerous for us," Biden reportedly said. "What you're doing here undermines the security of our troops who are fighting in Iraq, Afghanistan and Pakistan. That endangers us and it endangers regional peace.'"

In an important elaboration on these remarks posted on the foreignpolicy.com website on Saturday, Mark Perry, a writer with long-standing and close ties to the military brass, reported that Biden's private comments reflected the collective view of top US military commanders throughout the Middle East region.

"This is starting to get dangerous for us," Biden reportedly said. "What you're doing here undermines the security of our troops who are fighting in Iraq, Afghanistan and Pakistan. That endangers us and it endangers regional peace.'"

did he really just say that? I mean, I know he talks gibberish but this is unreal...we are in a war on two battlegrounds...of course our troops are in danger. moron. I assume this quote was his words to Israel. hey Biden, aren't they enemies the dangerous ones? what regional peace is he talking about?

He misspoke.He meant to say" the computers, composed of many pieces of programming move the market in unpredictable ways...especially if you think fundamentals or reality have any place in equity valuation"

Alas, Art was my boy all last year while watching the Doelarr fall to its knees. However, like any figurehead, he will only go so far.

Art pitches, and it is clocked outta the park. Coach runs out, motions to the catcher to stay put. "Art, hows the arm?" "Fine. I know this next guy....China....Let me stay in." "OK, but the guy on deck is PPT. Lots of HRs lately. Ill let you face China, guy. I don't know about PPT." Coach jogs back to dugout. China blasts first pitch for a double. Manager runs out, signals to the bullpin he wants relief. "Coach, let me stay in." "No Art, sorry...you have never pitched to PPT, and yesterday when I asked you said you hadn't watched any film on him either. Lighten up Art, you gave us 6 strong innings."

Perhaps Art, who has many worthy insights, has drunk a little too much Kool-Aid last night. Reminds me of the flip of Jim Grant awhile back. Every man has his Kool-Aid quotient. Too bad.

As for the PPT, if not them, then answer the question of the invisible buyer who shows up at precisely the right times to lift the equity markets, never leaves a SEC report of his positions behind & exits at the end of the stick rallies in the consolidation patterns, like today. Charles Bidermann is looking, but can't find this chap. Isn't the mutual funds, they're out of cash, retail maybe? Nope, not interested. Most elusive is he, this invisible buyer...

So Arthur, if you're reading this, you're with a prime broker UBS, tell us who this buyer might be, you see the order flow coming down, you know who it is. Tell us true.

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